Report: Osborne’s proposals won’t affect tax avoidance


by Newswire    
9:55 am - December 4th 2012

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A new report released this week by War on Want reveals that the centrepiece of the government’s plans to tackle tax abuse will have no impact on the tax avoided by Amazon, Google and Starbucks.

The report, Avoiding Avoidance, from tax justice campaigners War on Want, also shows that the government’s proposals, expected to be a highlight of the Chancellor’s autumn statement on Wednesday, would also fail to tackle recent tax avoidance scandals involving the Student Loans Company, the BBC and high ranking civil servants.

War on Want’s research shows the government rejected the opportunity to recover up to £5.5 billion a year via a General Anti-Avoidance Principle, instead opting only to target “artificial and abusive” tax avoidance through an anti-abuse rule.

Murray Worthy, the charity’s tax justice campaigner and the author of the report, says:

The government’s hypocrisy on tackling tax avoidance is breathtaking. Osborne and Cameron are happy to talk tough on tax. But, in reality, their plans will only go after the small fry on the fringes, while giving a green light to multinationals like Amazon, Google and Starbucks to continue avoiding billions in tax.

The report argues that under the government’s proposed plans the types of tax avoidance undertaken by large multinational companies would now be considered responsible “tax planning”, while only a tiny minority of cases at the very fringes of what is legal would be covered by the new rule.

War on Want is calling for a General Anti-Avoidance Principle aimed at tackling tax avoidance, raising revenue and increasing the equity of the tax system by reducing the opportunities for rich individuals and large corporations to reduce their tax contributions.

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More of this General Anti-Avoidance Principle bollocks. Yeah, I love the idea of HMRC arbitrarily deciding that something perfectly legal is abusive.

It would be nice if this lot, and similar baggage like Richard Murphy, would actually propose something which isn’t risibly vague.

Why don’t we just leave the EU so that it would become illegal? Most of it is the result of the Single European Market (Amazon, Starbucks, Google etc.). If we weren’t part of it, we could claim our fair share of corporation tax.

@2. Quite.

The General AAP e4tc wouldn’t actually stop what , for example, Google or amazon are doing. Because what they’re doing is expressly provided for in the law.

For example, Amazon. They sell from Luxembourg through UK based warehouses.

Whether they should pay UK corporation tax on such sales depends upon whether warehouses are considered a “permanent establishment”. That’s just what gives rise to hte liability for corporation tax.

So, are warehouse a permanent establishment? Well, in hte Luxembourg UK tax treaty it’s expressly says that warehouses are not a permanent establishment.

General AA whatever just wouldn’t change something that is specifically written into tax law in this manner.

“government’s plans to tackle tax abuse will have no impact on the tax avoided by Amazon, Google and Starbucks.”

wow. it’s almost as if the laws that these companies exploit to reduce their taxes are set by some sort of entity beyond the control of UK governments. But of course, I’m sure if that was the case then campaigners on tax issues would have realised this and would emphasize it in whatever they write on the topic.

oh.

1. Um, it wouldn’t be arbitrary if the GAAR is written into law.

6. Robin Levett

@BenM #5:

Um, it wouldn’t be arbitrary if the GAAR is written into law.

How do you implement a GAAR without (arbitrary) judgment calls by tax officials? From the Aaaronson report:

1.6…a broad spectrum rule would have to be accompanied by a comprehensive system for obtaining advance clearance for tax planning transactions. But an effective clearance system would impose very substantial resource burdens on taxpayers and HMRC alike. It would also inevitably in practice give discretionary power to HMRC who would effectively become the arbiter of the limits of responsible tax planning.

Without an advance clearance system, of course, tax planning becomes a lottery.

7. Robin Levett

@OP:

From the report:

at least 1,500 people employed by the BBC have…been embroiled in accusations of being paid as if they were companies, rather than as employees. This allows them to avoid National Insurance contributions and to pay tax through the company at a much lower rate than income tax.

And how many of them were actually properly seen as employees? From recollection, less than 10% of that figure of 1,500. The vast majority of those involved were properly seen as self-employed; technical staff in particular. Even many of the on-air talent now forced to be taxed as employees had a legitimate claim to be treated as freelancers.

Again, it was not the existenc eof the eprsonals ervcie company that gave the tax advantage – it was the fact that the individuals concerned were not, in fact and in law, employees of the BBC. The BBC insisted that those properly on self-employed contracts were paid through PSCs to ensure transparency.

6 Robin Levitt

If tax planning becomes a lottery under a robust Anti Avoidance Rule – good.

People should be forced to think long and hard before entering artificial schemes to avoid tax.

You will never stop people arranging there tax affairs to the best of there advantage, neither do you have the right to.

10. Churm Rincewind

@8 BenM: I return to the same point that I’ve made elsewhere. ISAs are an “artificial” arrangement to the extent that they over-ride conventional income tax arragements. You say that people “should think long and hard before entering artificial schemes to avoid tax”.

Well, whether they think about it or whether they don’t, the British public do seem to be rather enthusiastic about avoiding tax. Unless of course it’s someone else who’s doing it.

11. Robin Levett

@BenR #8:

If tax planning becomes a lottery under a robust Anti Avoidance Rule – good.

People should be forced to think long and hard before entering artificial schemes to avoid tax.

But the OP is arguing for an Anti-Avoidance rule that goes beyond catching artifical schemes.

Oh: and do you have shares in major accountancy firms?

12. So Much for Subtlety

6. Robin Levett

Without an advance clearance system, of course, tax planning becomes a lottery.

It is worse than a lottery. I used to live in a country where if you had a tax minimisation scheme you could get a decision made by a Tax Official. Which applied to your case and your case only. And which was legally binding.

Great if you had a cousin who worked in the Tax Office. A little expensive if you did not.

It was an open invitation to corruption and nepotism. What they are proposing sounds like something similar.

9 Blah

You will never stop people arranging there tax affairs to the best of there advantage, neither do you have the right to.

In a democracy we can do what we want. Subject to convincing enough people and winning a vote.

10. Chum Rincewind

ISAs are specifically designed by Parliament to encourage people to do something.

And there is a limit to their use, which is why allowances are rightly so low – in the scheme of things.

Using these is nothing like a company abusing transfer pricing arrangements.

ISAs are specifically designed by Parliament to encourage people to do something.

Ah. I think I understand.

If the State helps you avoid tax it is acceptable but if your accountant helps you do it you are immoral.

Let’s get back to first principles. Taxation is money forcibly extracted by the state from its citizens and companies. The state sets the rules about how much is paid.

The argument of the anti tax avoidance lobby says that when, as often happens, the state lacks the competence to set the rules to levy tax in a manner which they think is “fair” there is some moral obligation to pay more.

Rather like pointing out to the departing burglar that he has forgotten the DVD player.

14. Pagar

If the State helps you avoid tax it is acceptable but if your accountant helps you do it you are immoral.

Yes.

Taxation is money forcibly extracted by the state from its citizens and companies. The state sets the rules about how much is paid.

If you want to look at it from Business perspective tax is payment for the kind of civilised society which permits profit making.

For individuals, it is payment for kind of civilised society which means we can live relatively peaceful and prosperous lives.

You want the benefits a democratic state provides? Pay your taxes. Ignore buffoonish libertarians whose economic and social model plays out every day in Somalia.

By the way – it is us through Parliament that decides what is “fair” to pay in tax. Not whining Libertarian clowns.

If you want to look at it from Business perspective tax is payment for the kind of civilised society which permits profit making.

No. The prosperity came before the “civilisation”.

For individuals, it is payment for kind of civilised society which means we can live relatively peaceful and prosperous lives.

As above.

You want the benefits a democratic state provides?

And if I don’t? Oh yes, you’ll tell me to move to Somalia. Helpful.

it is us through Parliament that decides what is “fair” to pay in tax.

Even if we skip the obvious tyranny of the democratic mandate, the point here is that what the government we voted for has decided is fair taxation is not enough for the rabid communitarian.

You are arguing that those operating within the rules set by the government are not paying enough, that they need to contribute more of their own volition, and that is nonsensical.

Many taxpayers donate their tax rebates to a charity of their choice- not many insist the state must have it back.

Whatever is to be said about taxation those operating in the charitable sector or religious bodies who are tax avoiders by definition are not the ones to make any point. Giving a donation to War on Want and claiming tax relief on the donation is of course tax avoidance.

State tax officials must work in an environment of rules and clearly defined laws. The idea that tax officials could operate with a General Anti-Avoidance Principle where the official makes up the law to be whatever they want it to be is of course nonsense. One could scarcely think of a system more open to corruption.

Pagar @ 16

No. The prosperity came before the “civilisation”.

Fucking halfwit.

There wouldn’t be any ‘prosperity’ without a civilisation to harness it. Nowhere, either in history or this planet is there anything like prosperity that grew independently from civilisation.

I am seriously amazed that you people are absolutely blinded to this. You are seriously trying to suggest that farming, irrigation, literacy, roads, buildings, houses, currency, medicine, armies or anything else we would reasonably describe as the building blocks of a ‘prosperous’ people, oh including your precious property rights, would have spontaneously arisen without the civilisations that spawned them?

You are genuinely telling me that you think that our culture, from the roads, the educated populous the common language, the public services, the transport system, the rule of law etc, just happened to spring up out of the ground in an instant then we super imposed a ‘civilisation’ around it?

Buy a fucking book and stop embarrassing yourself.

And if I don’t? Oh yes, you’ll tell me to move to Somalia. Helpful

Why is that a difficult concept? You don’t want to live in a first World Country, so you baulk at the solution ‘move to a third world company’ as unreasonable, but are quite happy to suggest that the rest of have Third World status imposed upon us?

@ Jim

“No. The prosperity came before the “civilisation”.”

Fucking halfwit.

Of course, for some, the civilisation bit never came at all….

Pagar @ 19

What do you want me to say, Pagar? What is it that that you really expect us to believe? You post the type of stuff above in (hopefully at least) the full knowledge that such a statement cannot be reasonably defended. No-one can actually believe that ‘prosperity’ existed before civilisation in all seriousness. Nobody think that emerging hominids invented farming, to use one example, and then built civilisation around it, some decades later as a nasty trick to coerce the surrounding Libertarians into taxation. That’s stupid, Pagar and somewhere in your heart, you know it is not true.

The problem with people with your silly little ideology is, like every other conspiracy theory nutter, that you have managed to brainwash yourselves into a cult of total ignorance. Are we seriously expected to believe that you cunts are all too fucking stupid to understand how the World works? Are you really saying you think you can remove most of the fundamental blocks of our society away and leave the rest intact? You cunts really think removing, say, the education system will mean people will still be literate? You know, before we had a state education system few people ever went to school; before we invented the welfare state unemployed people lived in abject poverty. NORMAL PEOPLE KNOW THIS. We did not invent these things to tackle non-existent problems. We invented the welfare state to tackle grinding poverty that was caused because people could not find work. Not couldn’t be bothered to work, but couldn’t find work. The threat of unemployment is not a made up problem invented to tax cunts like you, it affected millions of people over a considerable time.

Try looking at the World from a position of reality and then building an ideology around it, instead of the other way around, Pagar.

20. Jim

” You know, before we had a state education system few people ever went to school ”

Except in your country Jim where nearly all kids went to school before the state education system. The exception being isolated rural areas and the children of coal miners. If children could not read they would not have been able to read the bible and been at risk of being seduced by papish superstition. Therefore, a network of schools and an education system before the state system.

“You know, before we had a state education system few people ever went to school;”

I think you rather need to check your history there.

Compulsory education actually came 20 years before state funding for example. So, actually, everyone was going to school before we had a state system.

Very similar with the NHS. That came into being in 1948. The first hospital the NHS built opened in 1963. So between 1948 and 1963 everyone was being treated in those hospitals that had already existed before the NHS.

The point being that before state provision of these things they were still provided. Maybe for money, maybe charitably, maybe even not as well as state provision made them.

But these things were not invented out of thin air just by government deciding to pay for them.

22

I bet those hospitals were far busier post 1948.

@pagar

There are several million of us who would quite like to avoid subsidizing the Starbucks payroll and numerous other multi-nationals. Hospitality, leisure, retail and many service industries pay the lowest wages and, unsurprisingly, account for the largest percentage of the workforce who claim tax-credits.
The same people who receive tax-credits actually pay tax in this country, thus the circle is complete and the above-mentioned rub their hands with glee at our generous welfare state.

24. Robin Levett

@Tim W #22:

Compulsory education actually came 20 years before state funding for example.

Depends on your definition of state funding; 1870 was when education became compulsory, and there was state funding of schools from well before then.

Tin @ 22

Compulsory education actually came 20 years before state funding for example. So, actually, everyone was going to school before we had a state system.

Who made it compulsory? That wouldn’t have been the State would it?

But these things were not invented out of thin air just by government deciding to pay for them.

Yes, I agree these things and others far too numerous to mention as well. However, like it or not, State intervention was a game changer. We did not introduce unemployment benefit in order to reward people too lazy to work. Or even to destroy the ‘free market’ mechanisms, those mechanisms were not providing a safety net that was deemed adequate. We did not devise a Welfare State at the height of a World War for a bit of a giggle, or to address non existent problems; we did that because we could see that during the previous decades we saw abject poverty on our streets.

So called Libertarians would have us believe that if you scrapped the Welfare State, then the free market would step in and create millions of jobs, but if that was remotely true then the welfare state (in its various forms, including the NHS) would never have came into existence would it? We would never had the mass unemployment (apparently, according to some caused by laziness) that occurred pre war, would we?

Same with incapacity benefit. The Tory Party did not shift people onto that for a laugh or a form of electoral bribery. They did it through a pragmatic look at evidence. The free market was not interested in offering long term sick with jobs in areas of high unemployment, when there was an adequate supply of young free labour. If anything the influx of Eastern European labour has exacerbated those people’s plight, not removed it.

This is the problem for these people, reality often gets in the way of their silly ideology. I admit that sometimes people can invent policies that are not robust to tackle problems decades into the future, but it takes a special kind of stupidity to invent a system that misses obvious lessons from the past.

26. Churm Rincewind

@13 BenM: You say of ISAs “there is a limit to their use, which is why allowances are rightly so low – in the scheme of things. Using these is nothing like a company abusing transfer pricing arrangements”

I say that in 2010/2011 the British public invested almost £54 billion in Isas. At a basic tax rate of 20% that’s nearly £11 billion of tax avoided. I don’t think that’s “low – in the scheme of things”.

It certainly dwarfs the amounts of tax which companies such as Starbucks are accused of having avoided.

My point is simple. All these arrangements are perfectly legal, and precisely observe what Parliament has laid down. So why is it OK for you and me to avoid tax, but not for Starbucks?

Ah Jim.

It is a measure of how far we have come down the road of state dependency and subsidy that it seems obvious now to conflate such with civilisation.

But all the great advances that took us from feudalism to modernity- in farming, medicine, transport, education and industry came about despite the existence of the state, not because of it.

St Thomas’s hospital, the London underground, Oxford university and the whole agrarian and industrial revolutions were not planned, funded and built by the state. They were built by people responding to the needs and aspirations of other people- market forces if you like.

It was only in the last century, particularly in the latter part of it, that the state got involved in trying to macro manage our lives on the pretext of regulation and redistribution and now we fear that without such intervention we would lack “civilisation”.

Both prosperity and civilisation came first. With central state management we are not less barbarous, we are only less free and, in time, we will be less prosperous as innovation is stifled and the beast requires more and more resources to feed on.

That is happening now.

Pagar @ 27

It is a measure of how far we have come down the road of state dependency and subsidy that it seems obvious now to conflate such with civilisation.

Nobody has made that mistake.

But all the great advances that took us from feudalism to modernity- in farming, medicine, transport, education and industry came about despite the existence of the state, not because of it.

That is a rather bold claim is not? On what evidence can you make such a remark? Because you have not supplied any.

They were built by people responding to the needs and aspirations of other people- market forces if you like.

These ‘market forces’ didn’t just arise out of thin air, did they? I mean thousands of people did not spontaneously roll up to the London underground (to use one of your examples) and move around London for the shear hell of it, did they? They were moving around London for a purpose. Why did London have a market for labour? Could the fact that London was the seat of Government have anything to do with it? Is it possible that London owes it’s prosperity to the fact the civil service departments reside there? Is it possible that the need for educated labour had an effect on London’s labour market? Could it be possible that compulsory education helped create an educated workforce?

You are trying to suggest that somehow the ‘State’ (in various guises over the centauries from church, monarchy and government) have had no positive effect of the rising prosperity of the Country. That everything we see today would have happened anyway, from education to clean drinking water in our houses and everything else without the influence of the State.

That is nonsense because you cannot possibly separate out anything from the model without major changes to the rest of that model.

However, if what you are saying is true then the solution for your people are in your own grasp. Countries around the World have seen their State collapse, with the most obvious example being Somalia. No pesky Governments shoving gun laws, corporation tax, health and safety or five a day fruit and veg down your throat. That place is ripe for mutuals, co-ops and free markets free of the dead hand of the State. So why is there no exodus, Pagar? Why are you keyboarding your way through this from one of the most constrained Countries on the planet and not the new frontier?

29. Churm Rincewind

@13 BenM: Apologies – the calculation at my post 26 is complete rubbish. There is no tax avoided on ISA contributions. The tax avoidance arises on interest payments within an ISA and on any potential capital gains tax. This was an embarrassing schoolboy error on my part.

The total cost to the Exchequer of tax avoidance through ISAs in 2011/2012 was £2.1 billion. But still a handsome sum, so I think my point stands.

30. Robin Levett

@pagar #27:

St Thomas’s hospital, the London underground, Oxford university and the whole agrarian and industrial revolutions were not planned, funded and built by the state. They were built by people responding to the needs and aspirations of other people- market forces if you like.

St Thomas’s Hospital? Closed down by Henry VIII with dissolution of the monateries; re-opened by the Corporation of London in 1551.

The London Underground? The first line, the Metropolitan, was advocated for by the Solicitor to the Corporation of London, and didn’t get off the ground until funded by the Corporation of the City of London.

Oxford University? Individual Oxford colleges were founded by many different people, including the church, religious institutions and individual churchmen powerful in the state. The University received a Royal Charter in the 13th century.

The industrial revolution? The state played a huge part in creating the conditions necessary for the revolution to take place.

It was only in the last century, particularly in the latter part of it, that the state got involved in trying to macro manage our lives on the pretext of regulation and redistribution and now we fear that without such intervention we would lack “civilisation”.

I think you meant “micro”-manage; but in any event that’s a ludicrous claim. Are you aware of what feudalism meant?

It appears that there are a number of different ethical views on the subject of Tax avoidance, as part of a University project i am trying to gain information in order to write a report about Amazon;s tax avoidance. If you could please spare a moment to fill out my survey it would be much appreciated http://www.surveymonkey.com/s/938JG5F


Reactions: Twitter, blogs
  1. Jason Brickley

    Report: Osborne’s proposals won’t affect tax avoidance http://t.co/V4B6hs7F

  2. leftlinks

    Liberal Conspiracy – Report: Osborne’s proposals won’t affect tax avoidance http://t.co/LNGZyYWb

  3. Alex Braithwaite

    Report: Osborne’s proposals won’t affect tax avoidance | Liberal Conspiracy http://t.co/x6pCk30A via @libcon

  4. PLEBpissedatgov

    Report: Osborne’s proposals won’t affect tax avoidance | Liberal Conspiracy http://t.co/x6pCk30A via @libcon

  5. Green cllr Rob White

    Report: Osborne’s proposals won’t affect tax avoidance | Liberal Conspiracy http://t.co/A35IEET8 via @libcon

  6. Robert Cook

    Report: Osborne’s proposals won’t affect tax avoidance | Liberal Conspiracy http://t.co/wNNgVS0Q via @libcon

  7. Jayne McCubbin

    Report: Osborne’s proposals won’t affect tax avoidance | Liberal Conspiracy http://t.co/8qlaVfyy via @libcon

  8. Hugh Crosfield

    UK Gov rejected opportunity to recover taxes to £5.5 billion/yr using General Anti-Avoidance Principle http://t.co/K1FybjmA





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